Rosier Outlook for U.S. Energy Security, But China Should Worry

By James Herron

EPA

The debate about the dependence of the U.S. on energy imports from unfriendly regions like Venezuela or the Middle East seems to have a certain fatalism these days. The natural assumption is that the problem is intractable and destined to get worse.

However, 20-year projections from U.K. energy giant BP make surprisingly optimistic reading for American energy worriers. BP’s well respected economists predict that U.S. dependency on foreign oil and gas has already peaked and will have declined substantially by 2030.

In their view, it’s China that should be fretting. If BP is correct, Asia’s economic powerhouse could be importing 80% of its oil and 40% of its natural gas within 20 years, a much more parlous position than the country is currently in.

According to BP’s long-term internal projections, released to the public for the first time Wednesday, U.S. oil and gas import dependency peaked in 2005 and is set to steadily decline over the next two decades. By 2030, it will be importing around half its oil, down from 60% currently, and will be entirely self sufficient in natural gas, BP says.

“Import dependency in the U.S. is likely to fall to levels not seen since the 1990s because of improved fuel efficiency and the increased share of biofuels,” said BP’s report.

At the same time biofuels production, mostly corn or sugarcane ethanol produced in the U.S. and Brazil, is expected to more than quadruple to 6.7 million barrels a day by 2030. “For the first time, non-fossil fuels will be major sources of supply growth,” said Ruehl.

BP expects the shale gas revolution that has already transformed the U.S. natural gas market to continue apace. By 2020, U.S. natural gas imports could fall close to zero and by 2030 the country may well be shipping cargoes of liquefied natural gas elsewhere, Ruehl said.

In contrast, China, which imported 54% of its oil and 13% of its gas in 2010, will see import dependency soar. By 2030, BP projects that the country will import 80% of its oil and 40% of its gas. Ten years ago, China was importing just 25% of its oil and no natural gas, so this will be a jarring transformation.

These figures go a long way to explain why state-controlled Chinese companies are on a multi-billion dollar spending spree, snapping up foreign companies in every corner of the world so it can exert greater influence on the international oil and gas flows on which it will be so dependent.

But these acquisitions can only go so far. Even assuming, as BP does, that China’s economic growth becomes far less energy intensive after 2020, the country still faces a big energy problem.

“The scale of China’s energy requirements is such that it has an impact on global energy markets, and prices. Energy prices (or supplies) could indeed become a temporary constraint on growth,” said BP.

For the U.S., this data is perhaps one small sign that predictions of the country’s inexorable slide against an unstoppable China are premature.

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